THE COMING LOAN.
ThE public assumes with much probability that in seeking the increased means which the expanding war requires, Mr. Gladstone will take a loan ; and it is further anticipated, with corresponding probability, that the loan will be one not of inconsiderable amount. Our own readers will have been prepared for the fact, and for our approbation of such a course. There is a time for making revenue exactly balance expenditure, and there is also a time for anticipating the resources of the future in order to serve the purposes of the future. It is a sound system of finance to take no loan of considerable exten- sion, in amount or duration, so long as the effort to meet the liabilities of the time by the income of the time does not cripple the resources of the country.* If it were probable that any public need were to be- come permanent, entailing a constantly-renewed charge upon the country, then it would be necessary, at any sacrifice, to meet that de- mand by annual votes—that is, by annual. taxation. But if the de- mand be temporary in its pressure while arising from causes of long duration and promising to have effeets of equal permanency, then an appeal may be made to the resources of the future, in order to meet a claim that belongs only by accident to the particular day. There is still a more practical test—strictly according, however, with the one which we have just indicated : as soon as the pressure of a special temporary taxation contracts the amount of means devoted to productive business, then the effort to balance income and ex- penditure would effect a theoretical and pedantic saving upon the produce of the future, at the cost of inflicting a serious defalca- tion from the sources of future wealth. It would be, so to speak, saving out of the crop at the cost of destroying the seed. The ne- cessities of the present war certainly exceed the means of any ordinary year's revenue ; and a taxation carried to the extent of meeting that claim in full within the year would inevitably re- quire our our agricultural, commercial, and industrial classes, to with- draw means means from active production, and so far would diminish the wealth of those future heirs in whose interest we profess to act. A loan, therefore, will be the true economy now
It does not follow that because Mr. Gladstone adopts the plan of a loan, he would imitate Pitt's early manner—that which endeared him to the hearts of the financiers in his own period, but which has rendered him an object of execration to the tax-ridden Eng- lishman. The vice of Pitt's finance did not lie in the fact that he took the money which he required in the form of a loan spread over a larger extent of time than the particular year for which the money was require& In describing the distinction between Pitt's early and his mature finance, Mr. Gladstoneparticularly animadvert- ed upon the fact that only in his latter years did Pitt make an ap- proach towards the balancing of income and expenditure : but that was not a correct indication of Pitt's fault. The first glaring vice of his finance lay in the improvident terms upon which he bor- rowed money. A young heir gambling in post-obits scarcely ex- ceeded the great Finance Minister. He created stock nominally for 100/. which was sold in the market for 61/. 17s. 6d., but which
was disposed of to contractors at 571. Gd. There is great reason to suppose that even that market-price just under 62/. was much below what would have been the price if the public had really un- derstood the nature of the transaction, and if Government had not been the head of the " Bear " party. That was the first fault. The second fault, we must hold, was the creation of permanent an- nuities at all. This is a kind of saving at the present moment which entails a dead loss upon the future wholly disproportionate to the temporary alleviation of burdens. No.inan owns a living inte- rest beyond his grandchild, and we should not be charged with debts of any generation older than our grandfathers. The difference be- tween a permanent stock and an annuity of considerable duration is insufficient to justify the entailing of a permanent burden upon the country. "It is all the same a hundred years hence," colloquially expresses the truth, that a benefit which will last out three genera- tions is almost the same to us as that it should last forever. Mr. Pitt endeavoured to diminish the appearance of his embezzlement of the monies of-the future by instituting that wild project which, as we have said before, still haunts the brains of some extravagant French Socialists—providing for the diminution of loans by loans, in a "sinking-fund" Should Mr. Gladstone seek to attain the same object—security for the extinction of the debt from the com- mencement of the debt—he would absolutely attain it by borrow- ing his money in the form of terminable annuities ; and the small additional cost thus incurred, unlike the cost for the sinking-fund, would be perfectly certain to attain its object.
We have already indicated two sources of the magnitude of the burden that is inherited from Mr. Pitt with the connivance of our honourable forefathers, in the ruinous terms upon which the money was borrowed, and in the use of a permanent instead of a ter- minable annuity. If those two errors had been avoided, many a nominal 100/. in the Funds would have been lessened by some 301. or so, the gross burden of the National Debt being proportionately reduced; and some portion of the stock itself would now have ex- pired. We have not investigated, nor would it be profitable to investigate, the exact figures ; but at a random guess it might be said that something like half the burden of the present National Debt must be assigned to these two faults in public finance.
• Spectator, 13th May 1854; page 507.
To this must be added a third, thb manifestation of winch must depend, not upon the Finance Minister, but upon the Government generally, though the Finance Mihister must be chargeable with a large part of the responsibili* It consists in permitting the war to be protracted for want of taking sufficient means at an early day, and of shaping its objects with sufficient distinctness and comprehensiveness to secure its termination as speedily as possible. For some part of the contest that was carried on with France, England may be said to have had no objects ; and for a still longer period, objects only theoretical to this country, practi- cal only to the Royal Families and Ministers on the Continent. Genuine English objects it had very few, and those appertaining to a prejudice more than to material interest. If its purpose had been better understood, possibly larger plans would have been shaped to expedite a settlement, larger means would have been taken. At all events, such must be the rule in the present case. If Mr. Gladstone is authorized by his Cabinet to ask sufficient means for bringing the war to a termination within a few years, he will effect a much more certain economy than if he were to take enough only for its continuance at a certain level scale, and were thus to protract it, like the last, for twenty years and more. Every year of the old war, it might be said, added twenty or thirty millions—seldom so little as ten—to our permanent burdens. A prompt termination of the war, therefore, is the most direct saving of loans and of future taxation.
Does it follow, however, that the Finance Minister should be obliged to hamper himself, and perhaps weaken his position in the money-market, by seeking restraints from Parliament which would fetter his hands in dealing with the capitalist ? There might be various modes of borrowing the money on terms more or less bur- densome to the country : the possibility of effecting the object would depend upon the power which the Minister retained in his hand, of negotiating with the holders of money. If he go to the money-market chained like Gulliver with the pack-thread clauses of an act of Parliament, we know the result. It would scarcely be possible to put a purchaser or borrower in a condition of more notorious incompetency. There is one thing which the Finance Minister knows at starting, and that is the amount required. What he wants is power to borrow—credit to a given amount. In commerce this species of liberty, combined with the general limitation, is perfectly understood ; and we have more than one form of the "letter of credit" for the convenience of travellers : why should not the House of Commons give the Minister an ample vote of credit ?
Previous page
